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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Conflict of Interest’

Ernst & Young pays $4 million for lobbying, violating auditor independence

Posted by William Byrnes on July 18, 2014

OSECn July 14, 2014 the Securities and Exchange Commission (SEC) filed a public administrative and cease-and-desist proceedings against Ernst & Young (E&Y) for E&Y’s violation of audit independence conduct regarding legislative lobbying on behalf of its audit clients.

E&Y has agreed to pay disgorgement of $1,240,000, together with prejudgment interest thereon of $351,925.98, and a civil money penalty of $2,480,000, for a total of $4,071,925.98 and it has agreed to cease & desist the activity.  See http://www.sec.gov/litigation/admin/2014/34-72602.pdf

The SEC public administrative and cease-and-desist proceedings against E&Y arose out of certain legislative advisory services provided by Washington Council EY (“WCEY”), which has been part of EY since 2000. Prior to 2009, certain conduct related to WCEY’s provision of legislative advisory services violated the independence rules with respect to two of EY’s SEC-registrant audit clients.

WCEY sent letters urging passage of bills to congressional staff on behalf of one of its clients.  These bills were important to this client’s business interests.  WCEY also asked congressional staff to insert into a bill a provision favorable to this client.

For another audit client, WCEY attempted to persuade congressional offices to withdraw their support for legislation detrimental to that client’s business interests. In addition, WCEY worked closely with congressional staff in drafting an alternative bill more favorable for the client.   WCEY also marked up a draft of the alternative bill, inserting specific language written by the client and sent the mark-up to congressional staff.

Despite providing the services described herein, E&Y repeatedly represented that it was “independent” in audit reports issued the clients’ financial statements.

By doing so, E&Y violated Rule 2-02(b)(1) of Regulation S-X and caused the clients to violate Section 13(a) of the Exchange Act and Rule 13a-1.  E&Y’s conduct also constituted improper professional conduct pursuant to Section 4C(a)(2) of the Exchange Act and Rule 102(e)(1)(ii) of the Commission’s Rules of Practice.



Posted in Compliance | Tagged: , , , , , | 1 Comment »

Conflict of Interest: Sole interest or Best Interest

Posted by William Byrnes on March 17, 2014

by Roland Ortiz

One of the most fundamental tools for estate planners, either professional or individuals, is a trust.    Specifically, an inter vivos trust which is a legal arrangement by which property under state law can be transferred by a grantor to a trustee for management and stewardship.  Typically used to transfer grantor assets away from their gross estate, while allowing beneficiaries the benefit of life income, distribution of grantor’s assets or both.  This benefit begins and ends with a trustee’s administration of all assets in the trust.

When accepting this position, the trustee must adhere to the trust provisions and the Uniform Trust Code when evaluating investments, distributions, as well as the termination of the trust.  These provisions and codes are the guidelines for the trustee to administer the trust with fidelity and prudence.  For a trustee, duty of loyalty and good faith for the betterment of the beneficiaries are the cornerstones by which their position exists.

Read the full article at http://www.advisorfyi.com/2014/02/conflict-of-interest-sole-interest-or-best-interest/

Roland Ortiz currently provides clients with evaluations on fixed income trading, derivative trading, security trading, accounting, and portfolio valuations.  You can reach him at:  www.linkedin.com/pub/roland-ortiz/27/622/806/

Posted in Wealth Management | Tagged: , , | Leave a Comment »

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